On March 27, 2017, the French Parliament adapted the law relating to the duty of vigilance for French parent companies and subcontracting companies. This new law imposes a duty of vigilance on major companies and follows a trend started on June 16, 2011 when the Human Rights Council endorsed the « Guiding Principles on Business and Human Rights », reminding states and companies of their duty and responsibility to protect and respect human rights.
Scope of application of the law
The new law targets companies operating in France and having:
• 5,000 or more employees including the employees of its subsidiaries with their headquarters located in France ; or
• 10,000 or more employees including the employees of their subsidiaries with their headquarters located outside of France. According to the French Government, around 150 multinational companies should be affected by this new law.
Elaboration and implementation of a vigilance plan
In order to comply with this new duty of vigilance, companies must elaborate, implement and release a vigilance plan which will allow identification of the risks and prevention of serious violations of human rights and fundamental freedoms, relating to the health and safety of individuals as well as to the environment, which could result from the company’s activities, its subsidiaries, suppliers and subcontractors.
The vigilance plan must include the following elements:
• A risk map aiming at identifying, analyzing and prioritizing the risks;
• Regular evaluation processes with regard to the company’s subsidiaries, subcontractors and suppliers with whom it has a well-established business relationship;
• Appropriate actions to mitigate and prevent human rights and environmental violations;
• Alert and whistleblowing mechanisms related to existing and potential risks;
• A mechanism for monitoring the measures implemented and assessing their effectiveness. The plan must be disclosed every year.
A decree should be published shortly providing further details on the content of the plan and specifying the means of implementation of this new obligation.
Any company failing to comply with its obligations of vigilance may be subject to sanctions. The new law provides for a specific mechanism in case of non-compliance:
- A formal notice must be sent to the company in violation of the law;
- If the latter does not take the necessary measures within three months of the formal notice, any person with a legitimate interest (e.g. a victim, but also a union, an organization or an NGO) can request the competent court to order, under financial constraint, that it complies with its obligations.
The law initially provided for civil fines of up to 30 million euros in case of non-compliance with these obligations, but the French Constitutional Council ruled that such fine was unconstitutional because of the vagueness of the wording of the law. However, despite the cancellation of the financial sanctions, non-compliant companies remain liable in the event they cause harm to another company and may be ordered to compensate such damage.
What to do?
The obligation to implement a vigilance plan entered into force on March 28, 2017. Therefore, companies need to rapidly evaluate the necessity of implementing it. However the wording of the new law is relatively broad and the future decree will provide further information on the content of the plan and the conditions for its application. In addition, if not already in place, companies should introduce new provisions in their commercial contracts according to which the business partner undertakes to respect human rights and protect the environmental. The possibility to conduct audits to verify the compliance of the business partners on this matter can also be included in the contracts. Finally, more than just a burden imposed on companies, these new obligations can be seen as a communication tool enabling companies suspected of violations of human rights to demonstrate their compliance and protect their reputation and brand image.